Don’t Sink My Battleship

Answer: Anticipating the future is a lot like playing board games and trying to predict your opponents’ moves. Add to that the impact of tariffs and geopolitical puzzles, all while trying to avoid any miscalculations, and you’ll have a fairly good idea of how challenging it is to predict financial markets. That’s a long way of saying that the answer to your question is “it depends.”

Three-D Tic-Tac-Toe, Monopoly, and The Game of Life were some of my favorite childhood games. Each of these games required strategic thinking and planning. These skill sets are both fundamental prerequisites of forecasting financial, social, and political trends and expectations.

Another favorite family game is Battleship. I mention this classic because the last thing anyone wants to hear in reference to their portfolio or financial plan is “You sunk my battleship!” As I recall, spreading your ships across the board played a role in winning that game. With that in mind, let’s take a look across the board at various industry sectors as they may relate to the current environment.

These are the eleven stock market sectors as defined by the Global Classification Standard (GICS), covering 145 industries across our economy:

1. Information Technology
2. Healthcare
3. Financials
4. Consumer Discretionary
5. Consumer Staples
6. Energy
7. Industrials
8. Materials
9. Utilities
10. Real Estate
11. Communication Services

Just as chess players take time to analyze the board, ensuring that the next move is the most beneficial, even if it’s not the most obvious choice, investors do the same. In the near term, the obvious choices continue to be technology and artificial intelligence.

Use of AI applications by government, the private sector workplace, and by individuals shows no signs of slowing down. Spending on cybersecurity, cloud computing, and AI is providing power to the tech sector. Global research and development investment in tech was $2.5 trillion, according to Forbes.

The International Energy Agency (IEA) estimates that AI use energy demand for data centers and AI models will more than quadruple from 2022 levels by 2026. These numbers assume greater efficiency yet still bring the dollar estimate to more than $8.4 billion. This is only estimated expenditures by AI firms and doesn’t include higher residential consumer use.

Beyond technology and energy, the recent Federal Reserve rate cuts and resilient consumer spending trends indicate growth for consumer staples, consumer discretionary names and healthcare. Interest rates recently fell, and the rate of inflation is stabilizing. These factors improve consumer discretionary sales, as well as that of consumer staples. The consumer discretionary sector includes e-commerce online shopping which remains strong. In recent years, we’ve realized permanent changes in how we interact and shop. In addition, communication services usage remains steady as this has essentially become a necessity.

Industrials or capital goods are benefiting from investment in manufacturing, robotics, and infrastructure. Domestic production incentives and deregulation are helping expand industrial productivity.

Zettabytes in the Cloud

IoT (the internet of things) creates demand for data storage and real estate to house the CPUs (central processing units) holding the data. Autonomous vehicles, video streaming, healthcare, and financial services data storage requirements by government and the private sector all increase the need for data centers.

Some of us may remember storage units stacked with Bankers Boxes holding documents. Today, we measure digital storage in units of zettabytes. To provide context, one zettabyte could stream 200 billion hours of HD video, or store about 250 billion DVDs. For those of us Baby Boomers who only cleared out the CDs and Beta tapes in recent decades, this is phenomenal.

Hyperscale data centers will place extraordinary demands on energy providers to cool these areas. Creators and innovators for storage innovation and energy systems will lead advancement with speed, security, and efficiency. Disruption is typically followed by evolution, and we’re in the midst of an evolutionary cycle.

The economy has changed at warp speed in recent years, indicating that maintaining exposure across all eleven sectors may help to manage risk during market shifts. For this reason, don’t discard even the least-favored sectors. As always, consult your team of trusted financial advisors to formulate a strategy that’s custom-made for your personal preferences, needs, and goals. Watching trends in the areas of leading economic indicators, jobs reports and inflation rates may help us navigate our way. Stay focused and plan accordingly.

Data: FactSet as of 10/03/2025